Today's Best Mortgage Rates

Waiting on mortgage rates to move down?

April 10th, 2013

Get ready to fire up your favorite mortgage calculator -- mortgage rates may be on the move again.

Nothing dramatic has happened to mortgage rates yet. After reaching their high for the year at 3.63 percent in mid-March, 30-year mortgage rates were back down to 3.54 percent by the first week of April. However, if other financial changes are any indication, a bigger move might be in store, which could have important implications for anyone looking to buy a house or refinance a mortgage. That's where consulting a loan calculator might come in handy.

Two developments may prove noteworthy for mortgage rates:

Oil prices take a sudden drop. After ending March above $97, by the fourth day of April the price of a barrel of oil had suddenly dropped below $93, a decline of more than 4 percent in less than a week. Falling oil prices would take some of the edge off of inflation, which had flared up suddenly in February. Mortgage rates, in turn, tend to be very sensitive to inflationary trends.

Bond yields decline sharply. Ten-year Treasury yields peaked at 2.06 percent in early March, and have since fallen by 30 basis points. Mortgage rates also peaked by around the same point and have since fallen, but they have not yet declined by anything close to 30 basis points.

There is a good news/bad news component to both of these declines. Most consumers would welcome both lower gasoline prices and lower interest rates. However, an underlying reason for weakness in both oil prices and interest rates often comes down to concern about the strength of the economy. For potential home buyers, that could adversely affect their financial condition as well as the general availability of home loans. People interested in refinancing share those concerns as well as the worry that a setback for the economy could snuff out the recent rally in home prices.

As for what's next for mortgage rates, there are many factors which will influence the outcome. However, since inflation is especially prominent among those factors, and since bond yields and mortgage rates are sensitive to many of the same things, the above changes mean it will be worth keeping a close eye on the mortgage market in the weeks ahead.

Richard Barrington has earned the CFA designation and is a 20-year veteran of the financial industry, including having previously served for over a dozen years as a member of the Executive Committee of Manning & Napier Advisors, Inc. Richard has written extensively on investment and personal finance topics.

This entry was posted on
April 10, 2013 18:05
and is filed under
Mortgage Rates
. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response.